THE BLOG

Better UK Tax Deal for Bangladesh Could Pay for 18,000 teachers

25/02/2016 15:58 GMT | Updated 25/02/2017 10:12 GMT

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Teacher Shila Rani Talukder in her ActionAid child sponsorship funded classroom, Uttor Kalambaz, Bangladesh

Bangladesh lost around US$14.5 million as a result of a single clause in its UK tax treaty in 2013. That's enough to pay the salaries of up to 18,000 new teachers in a country where more than 4 in 10 girls are not in secondary school.

Taxes are the building blocks of societies. They pay for the vast array of public services that societies rely on, and that people living in poverty so badly need. Yet the UK's global network of tax treaties is pushing down taxes in poor countries like Bangladesh.

ActionAid's new 'Mistreated' report is for the first time shining a light on how poorer countries are tied into the global web of 3,000 tax treaties.

Tax treaties - agreements between countries that divide up where multinationals should pay tax - may sound harmless but they have played a key role in many high-profile tax dodging rows, including the Google and Amazon cases. They provide a legal way for multinational companies to cut their tax bills. For example, if a UK company was operating in a developing country, a tax treaty would decide if and when that company would pay tax on its profits.

ActionAid has produced an online map for exploring the network of treaties.

The UK topped the global league table (alongside Italy) for the number of 'very restrictive' treaties with poor countries. It has 13 such treaties with Asian and African countries - more than China, USA, Russia and Germany.

For example, the UK's treaty with Zambia limits tax on dividends - money paid by companies in Zambia to shareholders in the UK - to 5%, one of the lowest rates in the world. That one clause risks costing Zambia millions every year. That is money that could help to fund essential public services.

Bangladesh was the country found to have the most treaties with richer countries - 18 -

which severely limit its ability to tax multinational companies operating on its soil. This is a country where 66 million people live in extreme poverty - less than US$1.90 a day. We want to see that money put to better use through investment in public services like schools and hospitals which are vital to tackling poverty.

This is the first time a systematic analysis of the global tax treaty network and its impact on poor countries has taken place. What has been uncovered is truly shocking.

On a global level it is clear that treaties with richer countries are often a bad deal for poorer countries. The rules are consistently being skewed in favour of wealthier countries. Worryingly, the deals struck are getting worse over time. Bangladesh and Zambia suffer big losses due to their treaties, but there are many more.

The row over the tax affairs of big companies like Google and Starbucks shows how strongly the British public feels that multinationals aren't paying their fair share.

Tax revenue is a crucial part of the journey towards a world free from poverty - funding improvements in public services such as health and education. The communities that ActionAid works with around the world are demanding action.

ActionAid is calling on the UK Government and governments around the world to revise these unfair treaties to ensure developing countries are able to collect a fair share of tax from multinational companies to support the fight against poverty.

It's time to make tax fair for the poorest people in the world.